• European indices saw a positive start to the session, bolstered in particular by tech; but, have since pulled back to a slightly more mixed performance overall as banks slip, Euro Stoxx 50 +0.4%, ES +0.3%
• The USD began firmly on the front-foot aided by further upside for US yields, 10yr at 1.08%; however, the DXY has dropped back below 90.00 with the broader complex now mixed
• US President-elect Biden is reportedly mulling a 'one-two' stimulus jab involving the balance of the USD 2,000 coronavirus checks and USD 3tln tax and infrastructure package; Axios
• US VP Pence is reportedly against invoking the 25th Amendment to remove President Trump
• Micron, +5.1% in pre-market, beat on EPS, Revenue and Q2 guidance while STMicroelectronics +3.5%, upgraded Q420 guidance; Stoxx 600 Tech +2.6%
• Looking ahead, highlights include US and Canadian labour market reports, Fed's Clarida

CORONAVIRUS UPDATE

Pfizer (PFE) said its COVID-19 vaccine appears to be effective against UK mutation and South Africa variants of the virus in lab tests. However, other reports noted that study was conducted on blood taken from people who had been given the vaccine and that its findings are limited because it does not look at the full set of mutations found in either of the new variants of the rapidly spreading virus. (Newswires/Telegraph)

European Commission President von der Leyen says EU has agreed with Pfizer (PFE) for further purchases of its COVID-19 vaccine, EU can now buy up to 300mln more doses. (Newswires)

Australia's Queensland state Premier announced a 3-day lockdown in Greater Brisbane due to COVID-19, while Australian PM Morrison said the COVID-19 situation in Brisbane is serious and that they will require pre-flight COVID testing on international flights, as well as reduce caps by half on international arrivals to some states through to February 15th. (Newswires)

Japan's Kyoto, Osaka and Hyogo are reportedly to cooperate and request for the government to declare a state of emergency for them. While Tokyo coronavirus cases increase by more the 2,300 today, according to NHK. (Newswires)

ASIA

Asian equity markets traded mostly positive on momentum from the fresh all-time highs on Wall St where the Nasdaq led the advances as large-cap tech names clawed back losses after the dust settled from the blue sweep and with better-than-expected data adding to the constructive mood. ASX 200 (+0.7%) and Nikkei 225 (+2.4%) were higher with outperformance seen in Australia’s tech and financials but with gains in the index capped by weakness in miners and after the Queensland Premier announced a 3-day lockdown in Greater Brisbane due to COVID-19, while Japanese exporters benefitted from favourable currency effects which have offset the headwinds from the State of Emergency declaration for Tokyo and neighbouring prefectures, as well as mixed Household Spending figures. KOSPI (+4.0%) was the biggest gainer with index heavyweight Samsung Electronics underpinned after its preliminary Q4 results in which oper. profit slightly missed expectations at KRW 9.0tln vs exp. KRW 9.1tln but still showed a 25% increase Y/Y and Hyundai Motor shares were in 5th gear with gains of nearly 20% following reports the Co. could partner with Apple for self-driving cars, despite the automaker confirming nothing has been decided yet and that the US tech giant was in discussions with various car manufacturers. Hang Seng (+1.2%) and Shanghai Comp. (-0.2%) were mixed with the mainland faltering after the PBoC’s operations resulted to a net weekly liquidity drain of CNY 505bln and due to ongoing tensions with US after MSCI and FTSE Russell announced to delete the Chinese telco giants from their indexes, while Beijing also warned that Washington will pay a heavy price if it proceeds with an Ambassador visit to Taiwan scheduled for next week. Finally, 10yr JGBs were subdued and languished at the prior day's lows amid gains in stocks and after continued pressure in USTs, with mixed 30yr JGB auction results also keeping price action drab.

PBoC injected CNY 5bln via 7-day reverse repos at a rate of 2.20% for a net weekly drain of CNY 505bln. (Newswires) PBoC set USD/CNY mid-point at 6.4708 vs exp. 6.4694 (prev. 6.4608)

MSCI Indexes announced is to delete China Mobile (941 HK), China Telecom (728 HK) and China Unicom (762 HK), while FTSE Russell is also to delete the Chinese telecom giants from global indexes. (Newswires)

US Mission to UN said the US Ambassador will visit Taiwan from January 13th-15th to meet with senior Taiwan counterparts and members of the diplomatic community, while the Ambassador will reinforce US government's strong, ongoing support to Taiwan's international space, in accord with the One-China policy. It was also reported that Beijing warned that Washington will pay a heavy price if the UN Ambassador goes to Taiwan and stated the US is playing with fire concerning the UN Mission to Taiwan. (Newswires/AFP/SCMP)

South Korean court ordered Japan to pay KRW 100mln to each comfort woman during World War 2, while Japanese Chief Cabinet Secretary Kato later responded that the ruling regarding comfort women in South Korea was already decided in the 1960s and that recent ruling is regrettable which must be dismissed. (Newswires)

• Japanese All Household Spending (Nov) M/M -1.8% vs. Exp. -1.3% (Prev. 2.1%). (Newswires)
• Japanese All Household Spending (Nov) Y/Y 1.1% vs. Exp. -1.5% (Prev. 1.9%)

US

US President-elect Biden is reportedly mulling a 'one-two' stimulus jab involving the balance of the USD 2,000 coronavirus checks and USD 3tln tax and infrastructure package, according to Axios. In separate news, Biden is to announce Commerce Secretary nominee Gina Raimondo, Labor Secretary nominee Marty Walsh and Small Business Administrator nominee Isabel Guzman today. (Axios/Newswires)

US President Trump said he is outraged by violence of the mob and that those who engaged in acts do not represent the US and will pay, while he added that his focus is on a smooth and orderly transition. It was separately reported President Trump told aides he is considering pardoning himself before leaving the White House on January 20th and was said to be preparing a list of aides and family members that could get a pre-emptive pardon which may include himself. (Newswires/Twitter)

US VP Pence is reportedly against invoking the 25th Amendment to remove President Trump. (Business Insider)

US Secretary of State Pompeo and Treasury Secretary Mnuchin were said to be among cabinet members that discussed 25th Amendment with staff according to CNBC citing sources, although sources later denied the report and stated that Treasury Secretary Mnuchin did not discuss 25th Amendment with staff. In other news, US Education Secretary Devos submitted her resignation to President Trump and four more senior advisers in the National Security Council have resigned following the recent violence on Capitol Hill. (Newswires)

Fed's Bostic (voter) reiterated his view that the Fed may taper purchases earlier than expected. (Newswires)

Fed's Evans (voter) said any change to asset purchases depends on how the recovery proceeds and that they will have a better idea of recovery dynamics by springtime and maybe June, while he added if by then, unemployment is coming down to 5% and making progress on inflation, more QE may not be needed. Furthermore, he would advocate using QE to send a message on Fed's commitment to 2% inflation if needed and noted it would not be unreasonable if the Fed first raises rates in mid-2024. (Newswires)

Fed's Mester (non-voter) is optimistic H2 growth this year will be quite a bit stronger than in 2020, while she stated Fed policy is well calibrated to expectations of softening H1 and a firmer H2. Furthermore, Mester added the Fed will be patiently accommodative and it will take a while before inflation reaches 2% and is on path to above 2%. (Newswires)

UK/EU

EU Unemployment Rate (Nov) 8.3% vs. Exp. 8.5% (Prev. 8.4%)

GEOPOLITICAL

North Korea leader Kim reportedly reviewed ties with South Korea and vowed to seek an 'all-out' expansion of external relations, according to state media cited by Yonhap. However, other reports noted North Korea also vowed a military build up. (Yonhap/Nikkei)

Iran Supreme Leader Khamenei will reverse nuclear steps if other parties to nuclear deal meet their commitments. (Newswires)

EQUITIES

European bourses trade somewhat mixed (Euro Stoxx 50 +0.6%), after opening with gains across the board following a similarly mixed APAC handover. US future meanwhile trade off best levels but remain in modest positive territory ahead of the US labour market report, although it is worth noting that further fiscal support for Americans was rubber-stamped after the payroll survey period, and will therefore not be reflected in the employment situation report (full preview available in the Newsquawk Research Suite). The narrative across the market seems to remain fixated on stimulus anticipation under the incoming Biden administration coupled with mass vaccine rollouts throughout the year in a bid to return to normality. That being said, downside scenarios for stocks prevail in the form of further COVID mutations (possibly rendering vaccines ineffective) and sooner-than-expected unwind of loose policy. Regarding the former, Pfizer said its COVID-19 vaccine appears to be effective against the UK & South African variants of the virus in lab tests. However, other reports noted that study was conducted on blood taken from people who had been given the vaccine and that its findings are limited because it does not look at the full set of mutations found in either of the new variants. Back to Europe, sectors are mostly higher with underperformance seen in financials amid losses in Credit Suisse (see below) and a pullback in yields - also contributing to the underperformance in the FTSE 100 (Unch) on account of its heavy bank exposure alongside unfavourable Sterling dynamics. On the other side of the spectrum, the Tech sector outpaces peers and notably outperforms amid a number of potential factors. 1) Samsung Electronics said its operating profit for the three months that ended in December likely rose 26% - shares closed higher by over 7%, 2) STMicroelectronics (+1.5%) reported net prelim revenue above the prior guidance due to "significantly better than expected market dynamics throughout the quarter", 3) Taiwanese chip-maker TSMC reported an improvement in revenue, 4) Micron beating on top and bottom lines which supported shares after the close. As such, regional chip-makers cheer the wave of bullish updates with Infineon (+6.7%) and ASML (+3.1%) among the top gainers in Europe. In terms of other movers, Credit Suisse (-3%) is pressured as it expects to increase provisions for the MBIA case and other RMBS-related cases by a total of USD 850mln vs prior provisions of USD 300mln. This charge will be reflected in 4Q20 financial results and thus the group is expected to report a net loss in the period. Conversely, Sodexo (+6.5%) sees gains after upping its guidance.

Alphabet (GOOG) - UK CMA has opened an investigation into Google's proposal to remove third party cookies and other functions from its Chrome browser

Boeing (BA) - Boeing has agreed to pay USD 2.5bln to settle US criminal charges that it hid information from safety officials about the design of its 737 Max planes. (BBC)

Micron (MU) - Q1 2021 (USD): Adj. EPS 0.78 (exp. 0.71/0.59 reported); Revenue 5.77bln (exp. 5.73bln). Gross Margins: 30.9% (exp. 29.6%). Q2 21: EPS 0.75 +/- 0.07 (exp. 0.63/0.52 reported); Revenue 5.8bln +/- 200mln (exp. 5.5bln). (Newswires) +5.1% in pre-market

STMicroelectronics (STM FP) - Prelim Q420 net revenues USD 3.24bln vs. guided USD 2.99bln, +21.3% YY. The above-forecast figure was due to "significantly better than expected market dynamics throughout the quarter." Q4 and FY20 earnings will be released on January 28th. (STM)

TSMC (2330 TT) December rev. TWD 117.4bln vs prev. TWD 103.3bln Y/Y.

LG Electronics (066570 KS) Q4 prelim. oper. profit KRW 647.0bln vs prev. KRW 101.8bln Y/Y, rev. KRW 18.8tln vs prev. KRW 16.1tln Y/Y

Samsung Electronics (005930 KS) - Q4 prelim. oper. profit KRW 9.0tln vs exp. KRW 9.1tln, rev. KRW 61.0tln vs exp. KRW 61.2tln. (Newswires) Shares rose 5.5% in South Korea.

FX

DXY - The Buck has bounced further, with the index now eyeing pre-New Year highs having scaled 90.000 to print a new recovery high at 90.132, so far. It may be just symbolic, but the fact that the Greenback has extended its recovery from 89.206 to break a losing streak is encouraging, and if it can end the week without suffering a major set-back then the omens and technical picture will look even brighter. However, NFP looms and could be more of a wildcard than usual given COVID-19 restrictive measures impacting the labour data, and anecdotal evidence carrying a downside bias to consensus, which could spark a retracement in US Treasury yields alongside curve re-flattening on a big payrolls disappointment. On the flip-side, any Buck retreat may be viewed as another opportunity to cover shorts or take profit on bearish Biden Blue sweep bets.

XAU/CHF/EUR - As noted above, the main victims of the Dollar revival, as Gold finally folded after fending off multiple attempts to take out Usd 1900/oz and then succumbed to a stop-driven collapse when the 100 DMA around Usd 1893 was breached in what some described as a flash crash. Meanwhile, the Franc only found refuge from support into 0.8900 after mixed Swiss unemployment rates and the Euro is trying to regain composure following a slide through 10 and 21 DMAs (1.2256 and 1.2222 respectively) that only came to a halt circa 1.2214.

AUD/NZD/CAD/JPY - All narrowly mixed vs their US counterpart having weathered an early EU storm, with the Aussie gleaning some support from still firm iron ore prices to reclaim 0.7750+ status even though Queensland has been forced into a 3 day lockdown due to a case of the coronavirus. Similarly, the Kiwi has clambered back from the low 0.7200 area, but seems to be facing stronger headwinds via the Aud/Nzd cross that has climbed over 1.0700 again. Elsewhere, the Loonie has rebounded quite firmly from sub-1.2730 levels in the run up to the Canadian-US jobs showdown and the Yen is paring declines from just under 104.00.

GBP - Sterling is ‘outperforming’, though marginally and more on the back of retrenchment rather than anything fundamental or a change in fortunes for the Pound that remains hampered by the Brexit hangover and battle to stop the pandemic in its new and increasingly infectious guise. Hence, Cable has not been able to convincingly regain grip of the 1.3600 handle and Eur/Gbp extend beyond 0.9000.

SCANDI/EM - Simmering oil prices are still a source of power for the Nok, while the Zar has found some much needed support to unwind some recent heavy losses from vaccine approval in SA.

South Africa's Eskom says it has suspended loadshedding as demand has declined ahead of the weekend. (Newswires)

FIXED

It has been relatively measured and limited rather than rapid or pronounced, but divergence between Bunds, Gilts and other Eurozone bonds vs Treasuries is more notable as the Dollar sustains recovery momentum, albeit off best levels ahead of the US open and BLS data. Indeed, the former has been up to and just through Fib resistance at 177.43 before fading at 177.48 and the 10 year UK debt future pierced 134.50 on the way to 134.59 in contrast to the T-note languishing below par within a 136-29+ to 136-23+ range ahead of NFP.

COMMODITIES

WTI and Brent front month futures eke mild gains but trade at session highs, with the former around USD 51.30/bbl and the latter meandering just under USD 55/bbl after briefly topping the level. Oil-specific newsflow remains light but the complex continues to be supported by Saudi's voluntary decision to cut 1mln additional barrels of production in February and March. Looking ahead, prices are likely to eye sentiment alongside COVID-related headlines, namely further lockdowns and travel bans. On the flip side, desks not that the cold weather has previously proved to be bullish for the energy complex, with the cold streak seen in North Asia currently helping to reduce middle distillate stocks in the region, according to ING. Elsewhere precious metals saw a bout of downside in during European trade in what seemed to be technically driven amidst a lack of fresh fundamentals at the time. Spot gold slumped below USD 1900/oz after tripping suspected stops and fell to a current low of ~USD 1877/oz (vs. high 1917/oz) while spot silver similarly relinquished the USD 27/oz handle to a low of almost USD 26/oz. In terms of base metals, Shanghai copper hit levels last seen in over nine years on reflationary play, whilst similar omens were felt by Dalian iron ore futures which rose for a sixth consecutive session as it also gains impetus on firmer demand prospects ahead of the Lunar New Year holiday.